Volume 1, Issue 4

13th August, 2008

Tax Alert
Procedure for filing TDS with insufficient deductee PAN


As you are aware that Central Board of Direct Taxes (CBDT) has made it mandatory for the tax deductors to file TDS/ TCS statements with a threshold limit of Permanent Account Number (PAN) of deductees (95% in case of salary payments and 85% in case of other payments ). Due to this stringent requirement, the deductors were facing undue hardships in filing the TDS /TCS quarterly statements for no fault of theirs.

Realizing the hardships faced by the deductors, CBDT has issued the instruction on the website of NSDL prescribing the procedure for filing the TDS statements with insufficient deductee PAN. The same is produced verbatim

The Procedure

As per instructions issued by the Central Board of Direct Taxes (CBDT), it is mandatory for deductors to file TDS/TCS statements with a threshold limit of Permanent Account Number (PAN) of deductees. To facilitate deductors who face problem in filing TDS returns because of insufficiency of PAN of the deductees and also to accommodate the deductees who have intimated their PAN, the Income Tax Department (ITD) has specified the following procedure for filing TDS/TCS returns:

Deductors can file a return containing deductee records which meets the specified threshold limit of PAN quoting, i.e., a deductor can file a return containing deductee details who have provided valid PAN. It can subsequently file a correction return with details of remaining deductees.

Example as below:

  • Suppose a challan payment of Rs.1,00,000/- has been made for nonsalary TDS against 100 deductees each with TDS of Rs.1,000/-. Under the existing procedure the deductor will have to quote at least 85 PAN failing which his return will be rejected.
  • If there are only 50 deductees whose PAN is available and the deductor attempts to file a return with details of 100 deductees with PAN of only 50 deductees, the return will automatically be rejected at present.
  • However, if he files a return with challan amount of Rs. 1,00,000/- and with details of 50 deductees with PAN, with deductee total of Rs.50,000/-, the return will be accepted. It means the deductor can furnish the details relating to such deductees whose PANs are available.
  • The deductor can later file correction returns with other details of remaining deductees with the same challan details, i.e., the challan amount should be the amount deposited (in this case Rs. 1,00,000/-).
  • The return will be accepted so long as the TDS total of incremental deductees is less than or equal to the balance of Rs.50,000/-.”

The implication of the above instruction to deductor is that now they would not be penalized due to non availability of PAN of the deductee. The implication for the deductee is that if they fail to furnish the PAN to deductor, deductor would not include the particulars of such deductee in its quarterly statement and the deductees may not get any credit for such tax deduction.

This step by the CBDT is a practical solution for the hardship faced by the deductor.